Indonesia Must Improve Economic Quality Amid High Informal Employment

Indonesia managed to maintain a positive economic growth trend above 5% in the second quarter of 2026, with growth reaching 5.29% year-on-year (yoy), or up 3.723% quarter-to-quarter (qtq), bringing cumulative growth for the first half of 2026 to 5.46% (ctc).

Commenting on the Statistics Indonesia (BPS) data showing 5.29% yoy growth in Q2-2026, BNI Chief Economist Leo Rinaldy described it as solid growth, reflected in two aspects: Indonesia succeeded in maintaining growth well above the average of its peer countries, which stood at only 3%.

From the expenditure side, the economic slowdown between Q1 and Q2-2026 was due to the normalisation effect of the previous year’s economic performance, while government spending managed to grow strongly, reflecting government support for purchasing power. On the other hand, real investment rose nearly 7% yoy, mainly supported by construction investment from both the public and private sectors, such as the physical development of the Merah Putih Village/Sub-district Cooperatives (KDMP).

In manufacturing, although it slowed, several subsectors strengthened, such as textiles, footwear and furniture, supported by export performance. Indonesia still faces challenges in improving the quality of economic growth, particularly regarding labour data, where 59.3% of the workforce is employed in the informal sector. Therefore, the government’s focus and fiscal policy direction should be on creating formal employment opportunities.